THE ECONOMY
particular source of supply, to ensure that users' needs are met at the best possible price, having regard to life-time cost and reliability of supply. Helping users to derive the best value in their purchases, the department formulates a specific strategy for each type of purchase based on market conditions, focusing on meeting requirements for high-value and critical items by cost-effective and reliable means.
Depending on circumstances, open, restricted or single-tenders are issued for the purchase of required supplies. Single tenders are used mainly for the purchase of patented items or for compatibility with existing equipment. Tender invitations are published in the Government Gazette and four local newspapers and are mailed to suppliers registered with the department. All purchases valued at more than $1.41 million are open to competitive bidding internationally. To allow easy access by overseas suppliers, the department has, since November 1995, included its tender invitations and related information on the World Wide Web. In 1995-96, the department placed orders of a total value of $4.65 billion, purchasing from 37 different countries. The major sources of supply were the USA, the UK, China, Germany, Japan and Hong Kong. Major items of purchase included computer systems, medical supplies and equipment, water pipes, electrical appliances, telecommunication equipment and services, and food provisions.
Supplies of goods to meet general needs are held in the department's new, purpose- built warehouse in Chai Wan, which was put into operation in late 1996 to replace two older warehouses in North Point and Cheung Sha Wan. The department also seconds supplies staff to other departments to ensure a professional approach to acquisition and maintenance of stores and equipment.
Revenue Sources
Hong Kong's tax system is simple and relatively inexpensive to administer. Tax rates are low, and the government accords a high priority to curbing tax evasion and minimising tax avoidance. The major sources of revenue are profits tax and salaries tax. Other significant sources include stamp duty on property and stock transactions, betting duty, duties on certain specified commodities and rates on property. (For major sources of revenue, see Appendix 13).
The Inland Revenue Department collects over 50 per cent of total revenue, including earnings and profits tax, stamp duty, betting duty, estate duty and hotel accommodation tax.
Earnings and profits tax, which alone accounted for about 43 per cent of total revenue in 1995–96, is levied under the Inland Revenue Ordinance. Persons liable to this tax may be assessed on three separate and distinct sources of income: business profits, salaries and income from property.
Profits tax is charged only on net profits arising in Hong Kong, or derived from a trade, profession or business carried on in Hong Kong. Profits of unincorporated businesses are currently taxed at 15 per cent and profits of corporations are taxed at 16.5 per cent. Tax is payable on the actual profits for the year of assessment.
Profits tax is paid initially on the basis of profits made in the year preceding the year of assessment and is subsequently adjusted according to profits actually made in the assessment year. Generally, all expenses incurred in the production of assessable profits are deductible. There is no withholding tax on dividends paid by corporations, and dividends received from corporations are exempt from profits tax. In 1995–96,
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